Management questions

Ch 5 Problems Break Even sales (units) = Fixed costs / Contribution Margin Break Even sales ($’s) : Revenue – VC – FC = $0 Sales (units) to get a profit = (FC + Profit)/CM 1. The owner of Old – Fashioned Berry pies is contemplating adding a new line of pies, which will require leasing new equipment for a monthly payment of $ 6,000. Variable cost would be $ 2 per pie, and pies would retail (sell) for $ 7 each. a. How many pies must be sold to break even? b. What would be the profit (loss) if 1,000 pies are made and sold in a month? (Hint: Already have units so multiply units times selling price – VC – FC) c. How many pies must be sold to realize a profit of $ 4000? (Hint: use formula above) d. If 2000 pies can be sold, and a profit target is $5,000, what price should be charged per pie? Assume VC and FC remain as stated in the initial problem. (Hint: have units, Have VC and FC, Need to solve for Selling price). What do you need to sell each pie for to make a $ 5000 profit.

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